HR7003 Assignment Sample - Finance Individual coursework

HR7003 Assignment Sample – Finance Individual coursework 2022

1. Introduction (HR7003 Assignment Sample – Finance Individual coursework 2022)

The report aims to highlight the financial side of ‘The London Docks Cafe’, situated near an airport which stands as the biggest advantage in attracting crowds. Success of a business lies on the primary analysis made on the suitability of the business idea, its market demand, the time and cost to be incurred.

A series of research work is done next on the availability of required resources and its assembling, the prevailing market competition. Preparing a budget on the expected expenditures and revenue generations, detailed financial analysis and feasibility reports of the business proposition is very essential. The apt managerial capacity of all the above factors including customer relationship and profit maximising techniques is a must.

2. Objectives of Budgeting a business

The budgeting of a business is a way to sketch some financial predictions to keep a track of its performances and evaluate accordingly the activities to be undertaken. It helps to analyse the business trend, the flow of revenue and expenditures, profits and losses by optimum utility of available resources (Kalyani, 2020). The main objectives are:

  • Provides Structural guidance: Budgeting a business concern helps it to follow a guided path to reach its objectives. A newly set business like ‘The London Docks Cafe’ tends to get diverted from the direction it’s supposed to be going because of the diverse hindrances popping up every now and then. The structured guidelines to what to focus on and do next comes at recue (Laatikainen, 2018)
  • Forecasting probable cash flows: The small businesses suffer the limitations of available capital and resources and irregularity in sales pattern. Estimating the cash flowing in and out helps in overcoming the consequences of crisis periods and repeated cash shortages (Siziba and Hall, 2019).
  • Proper allocation of resources: The capacity constraints faced by a business due to limitations on the volume of the produce on the part of the supplier is a scenario of all times. Budgeting can help in accurate allocation of limited business resources and funds according to the demand to avoid chances of wrong investments or wastage (Muda and Naibaho, 2018).

3. Revenue and Spending Variances Report

HR7003 Assignment Sample - Finance Individual coursework

(I) The Revenue Variances are tools to calculate the differences of expected sales and actual sales over a period. In the London Docks Cafe, sales are maximised by utilizing this information to sensing the attractiveness and popularity of the product.  The 3 types of Revenue Variances are:

  1. Sales volume Variance- It is derived by multiplying the differences of actual and expected units of sales with the budgeted price assigned to one unit of that product. The fluctuations in quantity sold can be sorted this way (Van Laethem, et al. 2019)
  2. Sell price Variance- It is obtained by multiplying the differences of actual and budgeted price of per unit with the actual units sold. The price may be forcefully set low to generate more sales or acquire more customers. A higher price signifies the market has less competitors and people’s glad acceptance of the product. (Adi and Lestari, 2020)
  3. Sales mix Variance- The associated variable costs, if separated out from a product price, contribution margin is obtained. Estimated contribution margin is multiplied to the differences of actual and budgeted units of sales, to determine sales mix variance. It helps to identify the reasons why a product has a huge difference in its margins (Mazzola and Disselhorst, 2019)

The London Docks Cafe has faced a fall in its actual revenue by £10000 due to a pandemic situation resulting in less customer visits and absence of home delivery facilities.

 (II) The Spending Variance is the difference of estimated expenses over the actual expenses incurred. The fluctuations in level of operational activities result in variable overhead costs over different periods which occur due to changes in cost of indirect materials used in manufacturing units. Overheads are unavoidable and fixed in nature (Wach et al. 2020).

The total Budgeted operating expense of The London Docks Cafe was £74300 and is higher by £4400 from the actual scenario. This proves the estimations made in allocating funds in the raw material purchase, rent, fuel, insurance, salaries and wages, utilities were accurate.

In addition, it had excess funds to support during stress. The London Docks Cafe efficiency prepared revenue and spending variance report to track its planned and actual budget that shows a profit of £20100 in real and lags behind the estimated value by £5600. [Referred to Appendix 1]

4. Areas of concern in The London Docks Cafe

The failure of The London Docks Cafe to generate the planned revenue is a big threat to the business. This leads to the gradual fall of its profit rising capability. The workflow when increased by several times will help the cafe to reduce its overhead costs and help to overcome the problem (Young et al. 2019) The recommendations along with the major areas of concerns for the management of The London Docks Cafe are as follows:

(a)Very low productivity: The productivity of a business lowers due to improper allocations of resources, unavailability of resources, low performing capacity of employees, or use of invalid machineries. The profit drastically falls in such situations which puts a negative impact on the business (Wiratama, 2019). The Cafe is currently performing with less number of employees for which it produces less than 20000 units of meals. The Measures to make up the loss are-

  • Employing more skilled cooks in the business who can prepare experimental dishes or add changes according to customers preferences.
  • Proper job allocation should be made to ensure that the experts fit into the job well to give their hundred percent.
  • Human resources should be taken care of and employee morale should be raised from time to time by conducting performance appraisals.

(b) Hygienic techniques must be adapted to prove the offered food is completely free from contaminants, germs and viruses.

HR7003 Assignment Sample - Finance Individual coursework

5. Profitability and Sustainability of The London Docks Cafe

(i) Profitability: The profit yielding capacity of an organisation through its conducted business affairs measures the profitability of that concern. A business sounds profitable when it is developing itself by proper allocation and optimum utilization of resources, thereby rolling its profits earned in the course to fetch more. Repeated investments to enlarge the size of business can drain out the available capital in case of small-scale business like the London Docks Cafe.

To earn Profitability, the economic and financial picture of the concern must be made very clear. The budgets of several months or financial years must be evaluated and compared to ascertain the financial ratios. The financial ratios will in turn help in understanding the areas of strengths and weaknesses (Turner, and Endres, 2017).

There are another 4 key sets to achieve business profit which comprises cost reduction, sales maximisation, increasing efficiency level, thereby the productivity without compromising with the quality. Expansion in new markets or introduction of fresh and unique products can also turn profitable (Mei, and Li, 2017). The estimated profit ratio of The London Docks Cafe is 25.7.  The management mentioned £25,700 profits estimations during the period on £100,000 planned revenue.

The actual profit ratio deviated from that of the forecast. The profitability ratio showed 23.33 only, from actual operating profit of £ 20,100 and actual revenue generated £90,000 (Ivanisević et al. 2019). [Referred to Appendix 2]

(ii) Sustainability: A business thrives through regular ups and downs. The ability to retain its position in an economically and financially healthy state over long periods of time (years) determines its sustainability. Business tends to lose its pace due to all the prevailing constraints and limitations which results in downfall and gradually the business ceases to exist.

Considering the slow growth rate of The London Docks Cafe, it can be said that, if not improved the company will face the problem of sustaining through the odd (Soundararajan et al. 2018)

Sustainability is a question of the long run so adding interesting innovations in the normal course such as seasonal discounts; fancy food products, special layouts, and so on can gather more crowds. Many-a-times businesses take up ways of designing products that are both of high demand and eco-friendly. Such adaptation is called Sustainable Profitability.

The environment in which the business is operating can help ensure its sustainability by building up technologies that reduce environmental stress (Johnson el at. 2017).

HR7003 Assignment Sample - Finance Individual coursework

6. Conclusion

The report concludes that The London Docks Cafe has benefited from budgeting the entire activities it had conducted. Repeated budgeting will help the cafe in judging its performance level over different time slots and help improve its financial decision making. The tendencies of Budgetary slacks can be avoided completely.

The concerns of cost variances to London Docks Cafe are identified through variance reports. The Profitability ratios were calculated through tables to develop the sustainability of the cafe. The excess of budgeted revenue in respect of actual revenue is a matter of concern to the business. Revenue variance sceneries have actually lowered the profit margin. Therefore, future planned budgets need to focus on this area and adopt tactful business strategies.

  Variable operational costs of business can be curbed by arising at economies of scale. Performance appraisals can be conducted in case of excess actual inflow over planned revenue. Henceforth, the London Docks Cafe will be able to avoid over optimistic assumptions in budget models.


Adi, P.P. and Lestari, D.I., 2020. Strategic Based Budgeting, is it Necessary?. American International Journal of Business Management, pp.53-56. Available at:

Ivanisević, A., Lošonc, A., Morača, S., Vrgović, P. and Katić, I., 2019. Exploring the business planning practices in smes in a developing country. Int. J. Ind. Eng. Manag10(1), pp.105-114. . Available at:

Johnson, C., Faught, S. and Long, J., 2017. Analyzing the needs of rural small businesses and developing economic sustainability programs for their management teams. International Journal of the Academic Business World11(1), pp.23-30. . Available at:

Kalyani, P.A.L.N.S., 2020. Managing Small Businesses During Recession. SMS Journal of Entrepreneurship & Innovation6(2), pp.51-59. . Available at:

Laatikainen, G., 2018. Financial aspects of business models: reducing costs and increasing revenues in a cloud context. Jyväskylä studies in computing, (278). Available at:

Mazzola, J.J. and Disselhorst, R., 2019. Should we be “challenging” employees?: A critical review and meta‐analysis of the challenge‐hindrance model of stress. Journal of Organizational Behavior40(8), pp.949-961. . Available at:

Mei, J., Li, K. and Li, K., 2017. Customer-satisfaction-aware optimal multiserver configuration for profit maximization in cloud computing. IEEE Transactions on Sustainable Computing2(1), pp.17-29. . Available at:

Muda, I. and Naibaho, R., 2018, March. Variables influencing allocation of capital expenditure in Indonesia. In IOP Conference Series: Earth and Environmental Science (Vol. 126, No. 1, p. 012066). IOP Publishing. . Available at:

Siziba, S. and Hall, J.H., 2019. The evolution of the application of capital budgeting techniques in enterprises. Global Finance Journal, p.100504. Available at:

Soundararajan, V., Jamali, D. and Spence, L.J., 2018. Small business social responsibility: A critical multilevel review, synthesis and research agenda. International Journal of Management Reviews20(4), pp.934-956. . Available at:

Turner, S. and Endres, A., 2017. Strategies for enhancing small business owners’ success rates. International Journal of Applied Management and Technology16(1), p.3. . Available at:

Van Laethem, M., Beckers, D.G., de Bloom, J., Sianoja, M. and Kinnunen, U., 2019. Challenge and hindrance demands in relation to self‐reported job performance and the role of restoration, sleep quality, and affective rumination. Journal of Occupational and Organizational Psychology92(2), pp.225-254. . Available at:

Wach, D., Stephan, U., Weinberger, E. and Wegge, J., 2020. Entrepreneurs’ stressors and well-being: A recovery perspective and diary study. Journal of Business Venturing, p.106016. . Available at:’_stressors_and_well-being_A_recovery_perspective_and_diary_study/links/5e714b9fa6fdcc37caf30fe4/Entrepreneurs-stressors-and-well-being-A-recovery-perspective-and-diary-study.pdf


Young, R., Frazer, L., Weaven, S., Roussety, M. and Thaichon, P., 2019. Work hard, play hard: Work-life balance in small business. In Subsistence entrepreneurship (pp. 195-213). Springer, Cham. . Available at:


Appendix 1: Operating income of London Docks Café

Particulars  Planning QTY Planning(£) Actual Qty Actual(£) Variance
Budgeted meals quantity 20000 18000 2000
Revenues 5 100000 5 90000 10000
Operating expenses
Raw Materials 2.5 50000 2.5 45000 5000
Wages and salaries 10500 10000 500
Utilities 3500 3400 100
Facility Rent 5000 5500 500
Insurance 2800 3200 400
Fuel 2500 2800 300
Total Operating Expenses 74300 69900 4400
Net Operating Income(Revenue-Expenses) 25700 20100 5600

(Source: MS-Excel)

Appendix 2: Profitability ratio

Operating profit ratio of planned budget Amount
Planned Profit ratio 25.7
Operating profit 25700
Revenue 100000


Operating Profit ratio of actual budget Amount
Actual profit ratio 22.33
Operating profit 20100
Revenue 90000

(Source: MS-Excel)

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